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What OPEC told Liberum clients about US shale oil and crude prices

15 May 2014 | Mentions of Liberum

US shale oil output will fall from 2018 and isn’t the balm to high global oil prices that some might hope for, the Secretary General of the Organization of the Petroleum Exporting Countries, Abdalla Salem El-Badri, told clients of Liberum in a recent exclusive meeting in London.

Click on the image below to read a full report in OPEC’s Bulletin of this and other areas of discussion >>

“Tight oil is another source of supply and it can help relax the oil market a little. But it is not a revolution. There is a lot of exaggeration about tight oil’s potential,” he told an 80-strong audience of oil and gas investors, company executives, lawyers and investor relations executives.

“The danger about exaggerating this potential, especially in the US, is that other countries might then tend not to invest in future capacity expansion,” he said. The consequences could be a future supply shortage.

US output of shale oil - also known as tight oil - is expected to reach about 3.9 million barrels a day by 2018 if 5m b/d of natural gas liquids are included. “But from 2018, output will decline,” Mr El-Badri added, citing OPEC’s World Oil Outlook.

A vigorous question-and-answer session with Liberum’s guests and event host Adam Smallman, Liberum's Head of Content, saw the Secretary General say that both producers and consumers were comfortable with crude prices around $100-$110 a barrel. “We are not looking for the two extremes in oil prices,” he said after the world had experienced three years of price stability. “This is because the extreme of higher prices at the end of the day will affect demand. And if demand is affected, then our business will be affected.”

Extreme low prices, in turn, can encourage high consumption and deter investment, he added.

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